Advertisement

'Huge hole' in public finances expected to close in coming years

The former Chair of the Fiscal Advisory Council says he expects the "huge hole" in the public fin...
98FM
98FM

10.41 10 Oct 2020


Share this article


'Huge hole' in public finances...

'Huge hole' in public finances expected to close in coming years

98FM
98FM

10.41 10 Oct 2020


Share this article


The former Chair of the Fiscal Advisory Council says he expects the "huge hole" in the public finances to close over the coming years.

The Government announced yesterday that it is forecasting a budget deficit of €21bn this year due to the COVID-19 pandemic.

Low or negative interest rates mean it is able to borrow more to plug the gap.

Advertisement

Seamus Coffey told Newstalk Breakfast that reducing the deficit will depend on how long the crisis lasts.

He said: "A huge hole has opened up in the public finances but unlike ten or twelve years ago, we hope it's temporary.

"Most of it is driven by spending, tax revenue has held up reasonably well and taxes are going to be about €3bn less than last year.

"So the bulk of that €17bn or €18bn is due to additional spending, whether that is income support, which has been very successful in supporting household income on aggregate terms at least, the Pandemic Unemployment Payment, the Temporary Subsidy Scheme, and of course lots of extra spending on health.

"We're going to see a huge run up in debt but that should close over the coming years.

Mr Coffey said the issue with the public health crisis is we don't know how long it will last for.

He said: "If Ireland was in the pandemic on its own, if this was an epidemic only affecting Ireland, I don't think we would be able to borrow the huge sums of money we are.

"What's the duration? I don't know, but as long as the ECB keeps the taps open there shouldn't be pressure to implement unduly harsh measures.

"We don't want the public health crisis to become a sovereign debt crisis."

Main image: File photo. Credit: PA

Share this article


Read more about

Budget Budget 2021 Public Finances

Most Popular